While the current Moldovan government presents the European Union only in terms of the political advantages it offers, which cannot be disputed, less is said about the risks and constraints that accession may bring. The purpose of this post, like many others, is to make the authorities aware of the costs of accession at the sectoral and micro level and the need to empower national negotiators.
Using examples from other countries, we note that there is a risk of various serious negative effects such as:
1. Loss of agricultural productivity
Since 2005, the number of farmers in EU countries has fallen by more than a third. Their assets and businesses are being absorbed and concentrated in large multinational companies. This is of course due to the common agricultural policy promoted by the European Commission, which favours large-scale production, including free and unconditional access of foreigners to agricultural land.
The agricultural sector in Moldova is both economically important, since together with the food industry it generates the largest share of GDP, and socially important - it employs the majority of people, especially in rural areas, where more than 27% of the labour force is employed.
Making excessive, unbalanced and irrelevant commitments means reducing the volume and range of domestic and authentic food products, replacing consumption with imported products, restructuring by concentrating the entire sector in a small number of companies and drastic job losses. It is worth noting that in the last few years alone, more than 72,000 peasant farms have ceased operations and/or reorganised.
However, the issue of farmland ownership and, in particular, foreign ownership will be a key topic in the negotiations. Most EU member states have liberalised access to land for foreign citizens and companies. To what extent Moldova will resist and defend its interests remains to be seen.
2. Destruction of local industry
Acceleration of integration processes without a large-scale investment programme to modernise the country will lead to a loss of competitiveness of our products on both domestic and foreign markets. And this will eventually lead to the shutdown of production, job cuts and serious social problems.
Unfortunately, the domestic market is already showing some negative signs, such as the withdrawal of foreign investors in favour of other countries with more attractive offers. Moreover, industrial consumption will be import-oriented and local exports will be steadily reduced to zero.
The dynamics of trade in recent years shows a process of substitution of consumption of finished products by imports, reduction of imports of raw materials for the main sectors of our national economy, as well as reduction of contracts for their processing on the territory of the Republic of Moldova. Only in 2024, exports decreased by 12 per cent compared to the previous year, while total imports increased by about 2 per cent, with imports of finished products more significantly.
The economy and its sectors face serious challenges in terms of the supply of cheap energy, raw materials and cheap equipment/technology. There are also challenges in accessing financial resources for survival and development. The national economy is currently vulnerable and not ready for open competition in the EU and third country markets.
Premature integration into the EU without synchronisation with the programme of reforms and development of high potential sectors will lead to their closure. Small and medium-sized enterprises, which account for about 98 per cent of the total number of enterprises in Moldova, will suffer the most. How prepared are we for these challenges? How to compensate and improve sectoral competitiveness? Does Moldova and its companies receive the same support and is it in the same competitive environment as its counterparts in developed countries?
3. Major energy price fluctuations
Although at first glance it may seem that accession to the EU and the European energy market, respectively, mean security and stability for Moldova, this is not actually the case. Modernisation of the energy market is not just a matter of adopting the European legal framework. Large investments in energy infrastructure projects are needed. Developing other sources of generation and increasing energy security.
The war in Ukraine has shown how fragile and vulnerable this sphere is, as evidenced by the energy prices that have simply skyrocketed in Europe and especially in Moldova. For example, in the Netherlands the biggest jump was in electricity bills - by 953 per cent, and in Latvia gas tariffs rose by 139 per cent. Lithuania, Romania and Latvia also saw significant increases in electricity prices - by 88, 77 and 74 per cent respectively.
A similar situation was recorded in the Republic of Moldova. During the energy crisis of 2022-2023, the prices of the main energy carriers increased significantly: electricity - by 3.5 times, natural gas - by more than 6 times, thermal energy - by more than 3 times, etc. Pension indexations and wage increases were insufficient and incomparable with inflation and growth of tariffs and prices. Energy poverty has increased significantly and absolute poverty has exceeded the threshold of 34 per cent, especially in rural areas.
Undoubtedly, the first priority is to build and modernise the energy infrastructure based on grants received from development partners and to contract reliable sources of supplying the market with the necessary energy resources. Only then can additional commitments in this area be negotiated.
Octavian Calmîc served as Moldova's Minister of Economy from 2016 to 2017, and has held various roles within the Ministry of Economy, including Deputy Minister.